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Health and Retirement are the Hangup in AFTRA Netcode Negotiations (Exclusive)

The merger process may be raising the stakes in an already tough economic climate.

AFTRA’s negotiations with the networks and television producers resume this week and the big issue, according to a source close to the process, is the same one that’s bedeviled Hollywood labor for the past several years: health and retirement.

Negotiations began Nov. 7 under a press blackout, but haven’t produced a deal yet. The contract under negotiation – AFTRA’s Network Code, colloquially referred to as the “front of book” – is the union’s largest, and generates more than $250 million a year in member earnings. It covers programs in all television dayparts, except scripted network primetime and scripted basic cable.

The source, who spoke to The Hollywood Reporter on condition of anonymity, said that wages and working conditions were also in play, but that health and retirement issues were the main focus.

That emphasis is probably heightened by the dynamic of SAG-AFTRA merger. Although SAG and AFTRA members have voted consistently for pro-merger candidates, there is some opposition within SAG, much of which centers on differences between the SAG and AFTRA pension/retirement and health plans.

If the current negotiations strengthen the AFTRA plans, that might blunt some of the opposition – but if the negotiations signal a reduction in benefits or tightening of eligibility, merger skeptics may raise additional red flags.

Time is running short. The next meeting of the SAG/AFTRA joint merger committee – the Group for One Union, or G1 – begins this coming Sunday, the 11th. AFTRA negotiators would probably prefer to have the contract buttoned up by then.

The issues are complicated though. AFTRA’s health and retirement plans, like those of the other unions, are funded primarily from two sources: employer contributions based on wages and/or residuals; and income from the plans’ investments. In the current economy, investment income is down and member earnings are under pressure as well. Meanwhile, healthcare costs continue to increase, and a pending Supreme Court appeal of healthcare reform casts a cloud of uncertainty.

All of those factors mean that employers may have to increase their contribution rates – and/or that benefits may have to be cut or eligibility tightened – in order to maintain the fiscal soundness of the plans.

However, changes in benefits or eligibility are technically beyond the negotiators’ control, since the plans are separate entities with their own boards of trustees (divided equally between management and labor representatives). Thus, the primary H&R issue on the table would be the employer contribution rate.

There’s usually a tradeoff between contribution increases and wage increases. However, the “new normal” for Hollywood contracts is 2 percent annual wage increases – a figure much lower than the 3-1/2 percent that prevailed as recently as SAG’s 2009-2011 agreement.

For labor, that makes the tradeoff between contributions and wages less palatable than ever. It’s unlikely that AFTRA negotiators would want to dip below the 2% level in exchange for increased health and retirement contributions, since doing so would buttress another claim made by merger opponents, which is that AFTRA cuts low wage deals.

However, on the other side of the table, it’s also unlikely that management negotiators will want to increase H&R contributions without a corresponding dip in the wage increase. That sounds like the formula for a tough negotiation.

The existing contract expired on Nov. 15, but has apparently been extended on a day by day basis, as an AFTRA press release last month said would be the case. Negotiations are hosted at the AMPTP, but are technically with the networks and studios as a group, rather than with the AMPTP itself.

AFTRA and the AMPTP declined to comment.

Covered programs under the front of book contract include dramas in first-run syndication, morning news shows, talk shows, serials (soap operas, or at least the few that still exist), variety, reality, contest, sports and promotional announcements. Those programs include, among others, Good Morning America, The View, The Price is Right, General Hospital, Saturday Night Live, Dancing with the Stars, The Voice, Survivor, 20/20, Deal or No Deal, Late Show with David Letterman and American Idol.

AFTRA is also facing an uphill slog in negotiations over its Sound Recording contract with Sony, UMG, Warner, EMI, Disney and most of their subsidiary labels. Those talks have stalled, with no bargaining sessions in recent weeks and none scheduled. The contract expires Dec. 31. There too, failure to close a deal would probably become a point of criticism by merger opponents.